Changes

Here is an example.  How long does the owner of a store keep it open at night?  As long as the flow of customers into his store pays him more money (marginal revenue) than it costs him to keep the store open (marginal costs).  As it gets later at night, the flow of customers declines, the owner makes less, and eventually his costs of keeping the store open will exceed the money that is being paid to him by customers.  As soon as the owner realizes that he is paying more to his workers to keep the store open than he is getting from customers, he closes his store for the night.  After a few weeks of this, the owner realizes that he usually makes money before a certain hour (perhaps 9pm), and loses money afterward.  Then he puts a sign on his door telling everyone that he closes at 9pm every night.  Marginal revenue exceeds marginal cost before 9pm for him (so he makes a marginal profit by staying open), while marginal costs exceed marginal revenue after 9pm (so he avoids losing money by closing).

Here is an example.  How long does the owner of a store keep it open at night?  As long as the flow of customers into his store pays him more money (marginal revenue) than it costs him to keep the store open (marginal costs).  As it gets later at night, the flow of customers declines, the owner makes less, and eventually his costs of keeping the store open will exceed the money that is being paid to him by customers.  As soon as the owner realizes that he is paying more to his workers to keep the store open than he is getting from customers, he closes his store for the night.  After a few weeks of this, the owner realizes that he usually makes money before a certain hour (perhaps 9pm), and loses money afterward.  Then he puts a sign on his door telling everyone that he closes at 9pm every night.  Marginal revenue exceeds marginal cost before 9pm for him (so he makes a marginal profit by staying open), while marginal costs exceed marginal revenue after 9pm (so he avoids losing money by closing).

==Discussion: Health Care==

==Example: Health Care==

By far the single biggest industry in the United States is health care (medical care).  It represents a massive one-sixth of our entire economy -- including annual expenditures of more than $2.2 ''trillion'' --  and costs are increasing each year.  It has three major components: government-controlled (Medicare and Medicaid), insurance-controlled, and private pay or uninsured.  Though many are unhappy with our system, it is in many ways the best in the world.  For example, the survival rate for the most prevalent form of cancer in men -- prostate cancer -- is 92% in the United States, but the survival rate for the same disease in England is only 51% under its government-controlled system.

By far the single biggest industry in the United States is health care (medical care).  It represents a massive one-sixth of our entire economy -- including annual expenditures of more than $2.2 ''trillion'' --  and costs are increasing each year.  It has three major components: government-controlled (Medicare and Medicaid), insurance-controlled, and private pay or uninsured.  Though many are unhappy with our system, it is the finest in the world and foreigners travel to the United States to have their medical problems treated.  The survival rate for the most prevalent form of cancer in men -- prostate cancer -- is 92% in the United States, but the survival rate for that same disease in England is only 51% under its government-controlled system.

Most other countries have some form of government-controlled, or socialized, medicine.  In the countries of Canada, North Korea and Cuba, it is actually illegal to pay money to a doctor simply to see you.  You can see only a doctor paid by the government in those countries.  In England, there is a two-tiered system: good care is provided to the few who can afford to pay for it, and free but inferior care is provided by the government to the vast majority who cannot.

Most other countries have some form of government-controlled, or socialized, medicine.  In the countries of Canada, North Korea and Cuba, it is actually illegal to pay money to a doctor to see you.  You can see only a doctor paid by the government in those countries.  In England, there is a two-tiered system: good care is provided to the few who can afford to pay for it, and free but inferior care is provided by the government to the vast majority who cannot afford it.

In the United States, under the free market, anyone can pay his own money for medical care at any time.  But in Canada, someone with an illness is typically put on a waiting list and, depending on his age and likelihood of survival, may not see a doctor for months.  In some cases, patients pass away before they obtain the treatment they need.  The Canadian government sets limits on wages and prices, and that causes shortages because there is always less supply when the price is artificially lowered by government control.  (Look again at the shape of the supply curve:  at lower P, there is lower Q).   

In the United States, under the free market, anyone can pay his own money for medical care at any time.  But in Canada, someone with an illness is typically put on a waiting list and, depending on his age and likelihood of survival, may not see a doctor for months.  In some cases, patients pass away before they obtain the treatment they need.  The Canadian government sets limits on wages and prices for medical care, and that causes shortages because there is always less supply when the price is artificially lowered by government control.  (Look again at the shape of the supply curve:  at lower P, there is lower Q).   

Lowering wages and prices prevents supply from rising to satisfy demand.  Then demand is much greater than supply, and patients have to wait a long time to see a doctor.  There is a lower survival rate from cancer in Canada than the United States because of the delays in diagnosis and treatment in Canada.  In Buffalo, which is on the Canadian border, doctors treat many Canadians who come over the border to pay for American medical care now rather than wait for it in Canada.

Lowering wages and prices prevents supply from rising to satisfy demand.  Then demand is much greater than supply, and patients have to wait a long time to see a doctor.  There is a lower survival rate for cancer in Canada than the United States because of the delays in diagnosis and treatment in Canada.  In Buffalo, which is on the Canadian border, doctors treat many Canadians who come over the border to pay for immmediate American medical care rather than wait for it in Canada.

This limiting of supply by government-set pricing causes what is known as "rationing".  More people want the service (a medical operation or treatment) than is available.  A waiting list is created to handle the surplus in demand over supply.  But when someone has a cancer growing inside of him, delay by being placed on a waiting list can be agonizing and deadly.  Quick treatment helps improve survival from cancer.  In the United States, where government does not set all prices and there is not any rationing yet, the survival rate for five common forms of cancer is over 90%.  Thanks to the powerful benefits of the free market, the rate of survival continues to improve in the United States.

This limiting of supply by government-set pricing causes what is known as "rationing".  More people want the service (a medical operation or treatment) than is available.  A waiting list is created to handle the surplus in demand over supply.  But when someone has a cancer growing inside of him, delay by being placed on a waiting list can be agonizing and deadly.  Quick treatment helps improve survival from cancer.  In the United States, where government does not set all prices and there is not any rationing yet, the survival rate for five common forms of cancer is over 90%.  Thanks to the powerful benefits of the free market, the rate of survival continues to improve in the United States.

But in Scotland, the birthplace of Adam Smith and his theory of the invisible hand in 1776, the survival rate from cancer under government-controlled medicine has fallen to "the worst in Europe, lagging behind countries such as Poland and Slovenia. ... Cancer experts blamed ... long waiting lists for the poor results."<ref>http://www.highbeam.com/doc/1P2-12923478.html</ref>

But in Scotland, the birthplace of Adam Smith and his theory of the invisible hand that he wrote about in 1776, the survival rate from cancer under government-controlled medicine has fallen to "the worst in Europe, lagging behind countries such as Poland and Slovenia. ... Cancer experts blamed ... long waiting lists for the poor results."<ref>http://www.highbeam.com/doc/1P2-12923478.html</ref>

A free market in health care benefits children too.  The life expectancy for a child born with cystic fibrosis in the United States is 37 years, but only 27 years in Ireland under its government-controlled (or nationalized) health care.

A free market in health care benefits children too.  The life expectancy for a child born with cystic fibrosis in the United States is 37 years, but only 27 years in Ireland under its government-controlled (or nationalized) health care.